Business

Top economist says the future’s bright

Peter Holt

DESPITE the negative reports from Europe, the Australian economy has continued to perform well thanks to low interest rates, high dollar values and the resource industry.

The main driver of growth for the country has been the large increases in mining-related investments, according to BIS Shrapnel's chief economist Dr Frank Gelber.

"Despite recent headlines to the contrary, commodity prices remain high, and mining-related investment will continue to expand over the next two years as projects currently under way are completed," he said.

"Furthermore, export volumes are starting to grow strongly as the various mining projects enter their production phase.

"Also supporting the Australian economy is increased household spending. Household spending growth has recovered since the GFC, underpinned by relatively low unemployment and rising incomes.

"Much of the increase in spending had occurred overseas, as the high Australian dollar encouraged Australian tourists to increase their spending abroad and discouraged foreign tourists from spending in Australia.

"However, over the past six months has been clear signs that retail turnover in Australia has finally started to recover."

The building industry had remained under pressure reflecting low levels of private investment and the winding-down of the Federal Government's post-GFC building stimulus package.

This had had a flow-on effect to other industries such as legal, financial and real estate services, Dr Gelber said.

"A modest recovery in dwelling building from late last year should breathe some life into these industries, supported by below-average interest rates," he said.

"We will see a broadening of investment and growth beyond mining."

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